Supported by accommodative macroeconomic policy, Pakistan’s economy saw robust growth in FY22, at the cost of growing economic imbalances. The Government has begun to further tighten policy to constrain aggregate demand. However, the catastrophic flooding is likely to disrupt activity and may lead to delays in the required fiscal consolidation. In the context of high macroeconomic risks and large financing needs, the outlook is sensitive to market perceptions and sentiment. The Government should adhere to sound economic management and carefully communicate a clear strategy for economic recovery, while judiciously targeting any new expenditures and maintaining progress on critical structural reforms, including those in the energy sector.